We will now cover the closing and occupancy portion on page 1 of the RPA-CA.
RPA-CA (Page 1; section 3)
3. Closing and Occupancy
Buyer Occupancy
Whether the buyer intends to occupy the property is important for matters such as liquidated damages, loan qualification, rate, and terms, and should be noted by checking the appropriate box.
Seller-occupied or vacant property
Occupancy is to be delivered to the buyer at a specified time on the close of escrow, or some other specified date before or after the close of escrow. If the seller remains in the property (e.g. COE + three (3) days) or the buyer moves in early, then a landlord/tenant relationship is possibly established. In either case, the parties should enter into a written agreement to document this different legal relationship. When title and occupancy do not occur at the same time, be sure to complete the applicable “Residential Lease Agreement After Sale” or “Interim Occupancy Agreement” (C.A.R. Forms RLAS or IOA-11) or Purchase Agreement Addendum (C.A.R. Form PAA, paragraph 2, “Seller to Remain in Possession after Close of Escrow”) concurrently with the RPA-CA. The PAA should only be used for occupancies less than 30 days. These forms clarify the responsibilities and obligations of the parties.
Occupancy is also important for insurance purposes. Generally speaking, in the event that the property is damaged or destroyed through no fault of the buyer before the title is transferred, the risk of loss falls on the seller. However, if the buyer intends to occupy early, the risk shifts to the buyer.
Likewise, if the seller continues to occupy the property after COE, the buyer is generally not protected by the seller’s hazard insurance, nor may the seller be protected.
Parties should consult their insurance advisors whenever title and occupancy do not transfer on the same date.
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All the information in this article is for informational purposes only and should not be interpreted as legal advice. For legal advice, consult a licensed attorney.
